Commerce preliminarily found that dumping occurred by mandatory respondents, Shanxi Taigang Stainless Steel Co., Ltd. and Tianjin Taigang Daming Metal Product Co., Ltd. Commerce also determined that the mandatory respondents are not eligible for a separate rate, and therefore part of the China-wide entity.
Commerce calculated a preliminary dumping margin of 63.86% for the non-selected respondents eligible for a separate rate. Commerce preliminarily assigned a dumping margin of 76.64% based on adverse facts available for all other producers/exporters in China that are part of the China-wide entity due to their failure to respond to Commerce’s requests for information.
As a result of the preliminary affirmative determination, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits based on these preliminary rates.
The petitioners for this investigation are AK Steel Corporation, Allegheny Ludlum, LLC d/b/a ATI Flat Rolled Products, North American Stainless, and Outokumpu Stainless USA, LLC.
Both Europe and China are trying to portray this summer’s moves — to form a joint team to monitor bilateral steel trade data and to supervise China’s moves to address overcapacity — positively as the European Union engages China in a constructive dialogue rather than publicly berate the People’s Republic.
No matter where China closes mills, there will be pain for those displaced as overcapacity is finally dealt with. But is any pace, at this point, fast enough? Or are import barriers the only remedy? Source: Adobe Stock/zjk.
Behind the scenes, the E.U. is every bit as desperate — arguably more desperate — than the U.S. to stem the flow of cheap steel imports. European steel producers are constantly berating their own governments — and particularly the E.U. — for not doing more to reduce the threat. At the recent G20 Summit, European Commission president Jean-Claude Juncker pressured China to address its steel overcapacity saying at a press conference in Hangzhou last week that the summit “must urgently find a solution to the problems facing the steel industry,” according to the South China Morning Post.
G20 Frustration Over Steel Overcapacity
Juncker wasn’t finished. He went on to say China’s steel exports to the E.U. increased 28% in the first quarter while prices fell 31% in the same period. He said steel overcapacity in China was twice the output in the E.U. and this was “a serious problem” adding the European steel sector had lost 10,000 jobs in recent years. Read more
It was on one of those weeks when a non-metal commodity dominated metals coverage. We mean the one that factors into just about every metal price through either production or transportation costs. The black gold that sluices across prairie and canyon in tanker cars, pipelines and trucks. The input whose value and production fluctuates at the whim of both Sheikh and wildcatter.
So, honey, then, right?
Saudi Arabia and Russia promised to work together on a “task force” to try to right-size the oil overproduction we’ve become accustomed to over the past two years. MetalMiner Co-Founder Stuart Burns warns that the days of $100 per barrel are, indeed, long gone but something could still come of this latest effort to rein in production. Naturally, the markets ebbed and flowed on speculation of what, exactly, that might be like a small ocean of the stuff filling to the brim a tanker bound for China.
Negative on that Manufacturing Growth
The Institute of Supply Management‘s manufacturing index turned negative in July for the first time since February. And the services gauge fell last month to the lowest level since early 2010. Perhaps the economy’s not doing as great as we thought it was?
The manufacturing index dropped to 49.4% from 52.6% in August and the ISM services gauge retreated to 51.4% from 55.5%. The combined reading of two indexes was also the weakest in six years.
Last week, we wrote about China Zhongwang and its billionaire owner, Chinese Communist Party member Liu Zhongtian, buying U.S-based extruder Aleris. Well, more trouble this week for Zhongwang as the Commerce Department launched a new investigation into transshipments related to nearly 1 million metric tons of aluminum stored in rural Mexico.
Zhongtian says he and his company have nothing to do with it. The Wall Street Journal? Well, it says shipping documents and sales receipts related to the massive stockpile all lead back to Zhongwang.
Less Titanium Production in Utah
Instead of forming titanium sponge by passing titanium tetrachloride in a gaseous phase over molten magnesium or sodium at its Rowley, Utah, facility, Allegheny Technologies, Inc., is cutting out the middle man. The specialty metals producer will now buy its titanium sponge on the open market. By idling the Rowley titanium facility indefinitely, ATI is also cutting 140 jobs. Read more
After gaining sharply in June and July, our Stainless MMI retraced last month. Nickel’s rally cooled down in August after a pick up in Indonesian ferronickel supply rekindled previous fears of a global supply shortage.
Philippines Supply Declines
In June and July, nickel rallied as the Philippines reviewed all existing mines in order to close those that had adverse impacts on the environment.
At least eight nickel mines have been shut down so far this year, cutting around 10% of the country’s capacity.
The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Recent numbers are already showing this decline in production. For the first seven months, China imported 13.84 million metric tons from the Philippines, down 27% from the same period last year.
The current disruptions in the Philippines have no doubt tightened the market for nickel ore triggering a price rally this year. However, in August investors questioned whether this shortage in China’s nickel-pig iron industry will actually translate into a shortage of nickel in the global market.
Indonesian Refined Nickel Supply Picks Up
While supply of nickel ore to China is declining due to current disruptions in the Philippines, supply of refined nickel to China is rising as Indonesia ramps up production.
China’s imports of ferronickel from Indonesia came at a five-times higher-rate than the amount taken in the same month a year earlier. For the first seven months, China’s imports of ferronickel from Indonesia surged more than four-fold to 390,700 mt. Comparing apples to apples, the nickel content of the year to date of ferronickel exports equals about 4 million mt of nickel, slightly less than the 4.13 mmt loss in the Philippines so far this year.
For this reason, we hear some analysts saying that China isn’t importing less nickel, it is just changing the form in which it imports the metal. And, as prices retrace, it’s no wonder that this reminds us to what happened just two years ago when nickel prices soared to then fall precipitously.
Is This Time Different?
Back 2014, nickel prices surged as Indonesia prohibited ore exports. However, prices sold-off later on as miners in the Philippines moved into the trade. This time, it’s the other way around. Environmental restrictions are shrinking supply in the Philippines while Indonesia is making up for that loss.
While prices fell in August, we need to be reminded that prices don’t move in a straight line and that, so far, the decline seems like normal after nickel gained over 30% in June and July. Also, there are two other factors that make us think that the decline won’t be as severe as back in 2014:
Back in 2014, nickel prices rose independently while the rest of the industrial metal complex was falling. This time, it’s not only nickel but we also see many industrial metals rising. The bullish sentiment on base metals this year should help limit nickel’s fall.
It’s barely been a month since the Philippines started to shut down mines and volumes may be squeezed further after the shutdowns accounting for about 15% of output. Recently, the Philippines’ mining minister said that there will absolutely be more suspensions following the eight already suspended.
For these reasons, we wouldn’t turn bearish on nickel just yet…
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It’s the latest data point for policymakers before they meet this month and decide whether to raise interest rates amid mixed signals and scant progress toward a 2% inflation target.
Steel Imports Into the US Down in July
Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute (AISI) reported recently that steel import permit applications for the month of August totaled 3,028,000 net tons. This was an 8% decrease from the 3,294,000 permit tons recorded in July and a 7% decrease from the July final imports total of 3,266,000 nt.
Import permit tonnage for finished steel in August was 2,282,000 nt, down 8% from the final imports total of 2,471,000 nt in July. For the first eight months of 2016 (including August SIMA permits and July final data), total and finished steel imports were 22,001,000 nt and 17,576,000 nt, down 22% and 23%, respectively, from the same period in 2015. The estimated finished steel import market share in August was 25% and is 25% year-to-date.
For the purpose of countervailing duties investigations, a countervailable subsidy is financial assistance from foreign governments that benefits the production of goods from foreign companies and is limited to specific enterprises or industries, or is contingent either upon export performance or upon the use of domestic goods over imported goods.
In the China investigation, Commerce calculated preliminary subsidy rates of 210.50% for mandatory respondents Jiangyin Xingcheng Special Steel Works Co. Ltd., Hunan Valin Xiangtan Iron & Steel, and Viewer Development Co., Ltd. based on the application of adverse facts available. All other producers/exporters in China have also been assigned a preliminary subsidy rate of 210.50%.
In the Korea investigation, Commerce calculated a de minimis preliminary subsidy rate of 0.62% for mandatory respondent POSCO. All other producers/exporters in Korea have been assigned a de minimis preliminary subsidy rate.
As a result of the preliminary affirmative determination for China, Commerce will instruct U.S. Customs and Border Protection (CBP) to require cash deposits based on these preliminary rates. For Korea, because its preliminary determination was negative, Commerce will not instruct CBP to require cash deposit rates.
The petitioners are Arcelormittal USA LLC, Nucor Corporation and SSAB Enterprises, LLC. Commerce is scheduled to announce its final determinations on or about January 19, 2017, unless the statutory deadline is extended.
Our Raw Steels MMI fell 7% to 53 points last month. This is the first time we have seen a significant decline in steel prices this year. August brought some interesting developments for the steel industry.
US prices Down, While China’s Prices Rise
By the end of the first half, domestic hot-rolled coil prices had risen 70% while prices in China were up by just 30%. The main driver of this price gap was trade cases, which made U.S. steel imports plunge this year, inflating prices domestically. Read more
U.S. construction spending during July came in at an annualized rate of $1,153.2 billion, nearly the same as the revised June estimate, which was $1,153.5 billion, the Census Bureau reported ahead of the Labor Day holiday. Even so, the July 2016 figure is 1.5% higher than the July 2015 construction spending total.
July’s numbers could be attributed to spending on private construction projects, which was up 1% compared to the revised June total. Public construction spending, by contrast, was down for the month by 3.1%. For the year, private construction spending gained 4.4%, while public spending dropped 6.5%.
The Construction MMI reflected healthy U.S. demand for construction metals and jumped nearly 5%. Economists polled by Reuters had forecast construction spending rising 0.5% in July but keeping its gains from June is still good news for construction.
The upward revisions to the May and June construction spending data could see the second-quarter gross domestic product estimate revised up from the 1.1% annual pace reported last month and economic growth is good for construction and the economy as a whole.
Aluminum, Surcharges Up
Construction received a boost from the aluminum components of the sub-index, which posted strong gains despite the Aluminum MMI turning in an overall flat performance this month. Fuel surcharges were up across the board as oil’s taken a bit of wild ride lately. Products such as rebar and H-beam steel were also up.
Despite individual product strength, steel remains a very bifurcated market with prices up in the U.S. and down globally. Despite promises to wind down production in the second half of the year, China is buying up coal for steel production. The price of coal needed to make steel has surged more than 45% over the past three weeks, to its highest level since early 2013.
Major Shipper Close to Insolvency
South Korean shipping giant Hanjin Shipping Co. appears to be sailing toward oblivion as we’re writing this, a move that reflects weaker global steel demand or overall excess capacity. In the past week, creditors pulled the plug after $900 million (1 trillion Korean won) in support failed to keep the company afloat, forcing Hanjin to file for bankruptcy protection. Seoul Central District Court, which will decide the fate of the company, has set a Nov. 25 deadline for it to develop another restructuring plan, but many experts think liquidation will be the most likely outcome.
“We are grateful that the leaders of the G-20 governments have recognized the severe impacts that global steel overcapacity in the steel sector around the world are causing to our industry. This is an important first step, but it must be followed with concrete policy actions by governments to reduce excess capacity, end subsidies and government measures that distort markets, and guarantee a level playing field driven by market forces in the near term. We appreciate the commitment expressed in the G-20 leaders’ statement for ‘collective responses’ to address excess capacity in the steel industry. This excess capacity and the government interventionist policies that have fueled it are the root cause of the surge of steel imports currently being experienced in many of our home markets,” the industry groups said in a news release.
“We are encouraged that the G-20 leaders are committed to forming a Global Forum on steel excess capacity, and that the leaders expect a continuing relationship with the Global Forum at relevant upcoming G-20 ministerial meetings. We are hopeful that the creation of a robust Global Forum, that includes participation by all major steelmaking economies, will be a substantive outcome of the meetings later this week in Paris of the OECD Steel Committee,” the groups continued.
“Our industry is at a crossroads. Governments must take action or we will remain in crisis. It is now up to the governments and the industry to work in partnership to create the Global Forum and define an agenda and process that will result in substantive policy actions to solve this crisis. The Global Forum has to start working as soon as possible, as the G-20 Leaders’ Communique clearly states that a progress report has to be ready for the relevant G-20 ministers in 2017,” the industry groups concluded.
The industry group includes representatives of the American Iron and Steel Institute (AISI), EUROFER (European Steel Association), the Steel Manufacturers Association (SMA), the Canadian Steel Producers Association (CSPA), CANACERO (the Mexican steel association), Alacero (the Latin American Steel Association), the Brazilian Steel Institute, the Committee on Pipe and Tube Imports (CPTI) and the Specialty Steel Industry of North America (SSINA).
U.S. Automakers sales numbers were down substantially in August, not that a drop wasn’t wholly unexpected — the industry has been growing strongly in recent years and at some stage was bound to peak — but the scale of the drop was enough to make the market sit up and notice.
According to the FT, Ford’s drop was the first to report, down 8% year-on-year for the month of August to 214,482, GM was down 5% to 256,429 vehicles and Volkswagen, possibly suffering from the emissions scandal, was hit the most down 9.1% to 29,384 vehicles. Of the majors only Fiat Chrysler bucked the trend, buoyed by a strong line up of SUVs to post a 3% increase to 197,000. Read more